Drugs firms to face call for concessions

Date: 20/04/2000

By Renée Cordes

THE European Commission is expected to demand early next month that Glaxo Wellcome and SmithKline Beecham eliminate overlaps in some product categories before giving them the go-ahead to merge and form the world's largest drug company.

Analysts say the firms' combined share of 7.3% of the global pharmaceutical market would not create or strengthen a dominant position. But they predict that the firms involved may be required to end overlaps in anti-depressants, herpes treatments, and anti-smoking drugs to win approval for the deal.

In the anti-depressants sector, for example, SmithKline's blockbuster drug Paxil competes with Glaxo's Wellbutrin. Smith-Kline also has a large market share in over-the-counter anti-smoking treatments such as nicotine drugs, while Glaxo sells a prescription medicine.

Ending these overlaps is not, however, expected to pose any real difficulties. "There is very little that will cause them problems," said Michael King, an analyst at SG Securities in London.

The Commission is due to rule on the deal by 8 May, more than three months after the companies announced their plans to merge, creating a firm with combined sales of more than €15 billion which will be a market leader in four of the five largest therapeutic categories in pharmaceuticals.

The companies predict that the merger will generate more than €1 billion in annual pre-tax savings within three years, mainly as a result of combining research and development and eliminating overlaps in administration, sales and marketing and manufacturing .

The planned merger has been unanimously approved by the the boards of both firms. A previous merger attempt two years ago failed because of a clash between Glaxo chairman Richard Sykes and SmithKline chief Jan Leschly.

The European Commission is expected to demand that Glaxo Wellcome and SmithKline Beecham eliminate overlaps in some product categories before giving them the go-ahead to merge and form the world's largest drug company.